Cover discharge. It also enables a bill to be

 

 

Cover Page

 

 

 

Student ID No:   10608381

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Programme:   MSc Shipping Business

                               

 

 

Module Code and Title:

GBCA583
Shipping Law

 

 

 

Module leader: Michalis
Andreadis

 

 

Contents

 

 
1.Introduction
3
2.Salvage and Towage
4
         2.1 Definition of
salvage and towage
4
         2.2 Towage in comparison to salvage
5
3.Bill of Lading
7
4.Conclusion….
9
5.Bibliography………………………………………………………………………….………………………….………………10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.Introduction

 

The main aim of
this paper is to analyse the difference between salvage and towage under the
legal point of view and explaining the function of the bill of lading as a
document of title. The research questions this paper will try to answer are:

1)     
How salvage and towage services are
differentiated?

It is well known
that salvage and towage have some similarities, at least at the first glance
when examining them. But that is mainly due to the fact that under certain
circumstances a towage can become salvage, but not the opposite. So, by
focusing on the differences it will be clear how each of those terms differs
from the other (White, 2000).

 

2)     
What is the function of the bill of
lading as a document of title?

A bill of
lading is a document of title to goods shipped aboard a sea-going vessel. It is
issued by, or on behalf of, a sea carrier in favour of the person who delivers
goods for shipment and onward carriage to a distant seaport. The bill often
declares that the carrier will deliver the goods to the shipper, or to the
order of the shipper, at the agreed destination. This wording enables the
shipper to endorse the bill in favour of a buyer and hand it over in return for
the price of the goods. In turn, the buyer can then obtain delivery of the
goods from the carrier by tendering the bill at the port of discharge. It also
enables a bill to be pledged with a bank as security for an advance in favour
of a buyer. The advance enables the buyer to pay the purchase price. The legal
effect of the bill as a document of title is said to be its ability to confer
on the lawful holder of the bill the right to receive delivery from the
carrier. (White, 2000).

 

Those two
questions will be answered with references to noticeable cases that will prove
the differences to salvage-towage and explain the functionality of the bill of
lading as a as a document of title.

 

 

 

 

2.Salvage
and Towage

 

2.1
Definition of salvage and towage

 

What is
Towage?

Towage
differs from the carriage of goods in that under a towage situation one vessel
which is self-propelled generally tows one or more vessels, usually barges that
are not self-propelled. Towage is “the supplying of power by a vessel . . . to
draw another” vessel. The key determination between towing and salvage is
whether a peril exists. Simply put, if the vessel is not in “peril” then it is
not salvage. If a vessel is simply providing a service, i.e. fuel, tow,
assistance, then it is likely a tow (White, 2000).

What is
Salvage?

A contract or
three elements are necessary to a valid salvage claim:

1. A marine
peril.

2. Service
voluntarily rendered when not required as an existing duty or from a special
contract.

3. Success in
whole or in part, or that the service rendered contributed to such success.

Therefore, as
described above a vessel must be in trouble, danger, or specifically “peril”.
For example, if it is a soft aground vessel the danger may not be described as
peril, however if it is hard aground then the danger may fall into the realm of
“peril”. When a vessel is in this perilous state the salvager must be doing so
voluntarily, not under a duty like the coast guard or other similar mechanism.
Finally, the salvage must be successful (SEMCO SALVAGE & MARINE
PTE. LTD. , 1997).

 

 

 

 

 

 

2.2
Towage in comparison to salvage

 

The admiralty
courts have addressed the difference between “simple towage” and salvage
services on numerous occasions and have made it abundantly clear that, in most
such situations, the services rendered are salvage. Indeed, one leading
admiralty treatise has described the act of rescuing a ship at sea by towing
her to a place of safety as the “prototypical” act of salvage. However, this
does not necessarily mean that the salvor will be entitled to a huge reward for
such services.

As discussed,
a salvage service implies that there was some degree of peril and assistance
above towage that was provided. The peril does not have to be immediate. It is
sufficient if the property is in danger, either presently or reasonably to be apprehended.
The best way to understand the application of towage v salvage is to review the
common law (Maritime Coverage Corp,
2016).

 

To make clear
the differences between salvage and towage we will examine and analyse some
case studies.

 

 

Evanow v. M/V
NEPTUNE

The vessel
Neptune encountered a major storm and docked in the Crescent City harbour.
While in the harbour, the Neptune became disabled and grounded on a sandy
shoal. The crew of the Neptune secured the barge alongside the disabled tug.
That night, a terrible storm caused gusts up to ninety knots and swells inside
the harbour to reach six to eight feet. These conditions pounded the barge
against the port side of the tug. Because of the diesel fuel and oil aboard the
Neptune as well as hydraulic fluid in the landing craft unit, the Coast Guard
Pacific Pollution Strike Team assessed the threat of pollution as
“substantial,” and a tow was called in to retrieve the barge (Evanow v. M/V NEPTUNE, 1998).

The question
presented was whether a contract is one for towage or for salvage. The Court
enumerated that this distinction has several consequences.

 

 

The Court
examined the character of the service rendered to determine whether a contract
is one for salvage. The Court found a marked and clear distinction between a
towage and a salvage service. When a tug is called or taken by a sound vessel
as a mere means of saving time, or from considerations of convenience, the
service is classed as towage; but if the vessel is disabled, and in need of
assistance, it is a salvage service (Evanow v. M/V NEPTUNE, 1998).

 

It was
determined that the existence of a marine peril distinguishes a salvage
contract from one for towage. Such a peril exists “when a vessel is exposed to
any actual or apprehended danger which might result in her destruction.”
Whether a marine peril exists is a question of fact reviewed for clear error.
In this case it was determined that this was indeed a salvage action (Evanow v. M/V NEPTUNE, 1998).

 

The Flottbek

The Flottbek
was a vessel caught in a rough storm about a quarter mile to a half mile from
the rocks. While the peril was in dispute, the fact that the vessel was unable
to pull out of the predicament on its own accord was not. Thus, it anchored and
called for help.

“In cases of
simple towage, only a reasonable compensation is allowed, as upon a quantum
merit. In case of salvage, the award is upon a broader and more liberal scale,
as we have before stated. In McConnochie v. Kerr, Judge Brown said: ‘A salvage
service is a service which is voluntarily rendered to a vessel needing
assistance, and is designed to relieve her from some distress or danger either
present or to be reasonably apprehended. A towage service is one which is
rendered for the mere purpose of expediting her voyage without reference to any
circumstances of danger” (McConnochie v. Kerr, 1881).

The Court
found that they crew felt that they were in enough peril to call for assistance
and to drop their anchors for an expedited departure. Therefore, this was a
salvage.

 

 

 

 

 

Mississippi
Valley Barge Line Co. v. Indian Towing Co.

A barge was
adrift in a calm sea when a tug pulled beside the barge to get a mate on board.
Thus, commencing the tow and delivering the barge at a Pensacola dock three
hours later.

“For a
derelict barge, like a derelict person, may be exposed to many perils, the
least of which is foundering on an obvious shoal. Salvage at sea may and often
does call for the performance of exciting acts of great bravery to rescue lives
or property from the jaws of a near and certain doom. But it need not, for the
aim of salvage is to save. To aid before it is a do-or-die wager with high
risks, high stakes, and high rewards, assures the greatest likelihood of
recovery at the least peril. Maritime salvage is not reserved for hero alone.
Its generous but judicious liberality is to encourage mariners instinctively to
respond to need- be it great or small, drab or spectacular” (D. Mississippi
Valley Barge Line Co. v. Indian Towing Co., 1956).

Is a barge at
drift, in peril? The Court thought so and therefore a salvage was found.

 

 

3.Bill of Lading

 

Bill of lading
is a multiple choice of document i.e. it acts as contract of carriage of goods
by sea, as a formal receipt for the goods shipped and as a document of title.
The function attributed to bill of lading are based on ancient customs and
usages followed by merchants in trade spheres which are largely regulated by
their own law known as lex_marcatria law merchants.

Unlike
charter party, the contract of carriage of goods by sea in liner trade is
evidenced by bill of lading which itself is not a contract of carriage of goods
rather an evidence of an already concluded contract of carriage between shipper
and carrier orally. It
is to be noted that whatever orally was agreed between shipper and the carrier,
do not bind the lawful holder who acts in good faith. The bill of lading as document of
title. In modern international trade and shipping this is probably the most
important characteristic of the bill of lading. A “document of title”
is a document that enables the holder (the person who “possesses” it)
to deal with the goods described in it as if he was the owner.
“Title” is the right to ownership. “Ownership” can be
explained as the right of using, altering, disposing of (that is, selling) and
destroying the goods. This “ownership” or “title” can be
transferred by a formal transfer of the document, such transfer being an
“endorsement” and/or delivery of the document itself (Wegener v Smith, 1854).

Leduc And Co
V Wards is a case which proves that specific nature of Bill of Lading, where
the bill of lading contained a clause enabling the carrier to deviate from
agreed route which caused the ship to be lost and delivery of goods was
delayed. The lawful holder sued the carrier. The carrier took the plea that the
shipper knew about the deviation clause in the bill of lading. Therefore, no
breach of contract whatsoever has been created. However, the court refused to
accept the claim of carrier and held that, “Lawful holder who has no knowledge
of any such commitment my not be made, bound to follow it” (Case Leduc And Co V Wards,
1888).

 

Furthermore, as
mentioned one of the characteristic of the bill of lading is as a document of
title. A bill of lading to be a document of title must be negotiable which
simply means it should be transferable. A bill of lading to be transferable
must be draw as delivered or assignee. a bill which is specifically drawn in
the name of a receiver, would not fall within the category of negotiable
instrument and would not be able to transfer title to goods in transit, such a
bill is called is called “straight bill”, the traders prefer “order bill
of lading “for the reason that it enables them to sell/transfer goods while
they are at high sea (sanders bros. v Maclean,
1883).

The
proprietary function of the Bill of Lading as a document of title was
customarily recognised first in the case (Lickbarrow v Mason, 1788) and the recognition
as a document establishing the ownership of the goods and “constructive
possession of goods by the transferee”. It was also clearly established in this
case that the ‘right of stoppage in transit’ not applicable against a “bona
fide” purchaser of the goods, but only between the buyer and seller. Bill of
Lading is therefore a “control document” and when it is transferred to another
person by way of endorsement and delivery, a constructive possession is
transferred “rather than the title”. In the case of a contract of sale when the
shipper, first indorse some sets of original Bills of Lading to a party and
then on a later date assigned and transferred remaining sets of original Bills
of Lading to another party, the former would be the owner of the goods and not
the latter one who subsequently received another set of original bills. In the
case of documents of title to goods, the legal obligation is that the carrier
or the holder who is having the physical possession of the goods can deliver
the goods only to the ‘holder’ of the document of title to goods or Bill of
Lading having “sufficient control” over the goods and not to any other person.
But no assignment could be done once the delivery of the goods is completed. In
this situation the carrier has no other choice but to deliver the goods to the
person who is having “constructive possession” over the goods (Lickbarrow v Mason, 1788).

4. Conclusion

 

Bill of Lading

When the
cargo is in transit it is not possible to sell or resell it to other buyer by
way of physical delivery of the goods. It is required to wait till the goods
arrive the destination for selling or reselling. This was a big disadvantage
for the shipper who must wait till the completion of the voyage. Sometimes due
to various reasons the ship may subject to ‘prolonged period of transit by
sea’. To overcome this hindrance, need arises for a sales process in transit,
without physical delivery of goods.  This
is also popularly known as ‘High Sea sales’ among the international traders. Negotiability
of Bills of Ladings help the traders to do a process of indorsing and
transferring Bill of Lading in place of the goods and therefore do the transfer
rights of the goods to more than one person’s even when the cargo is moving.

Towage and
salvage

A contract
for towage is for agreed purposes and an agreed sum, i.e. the tug’s duties and
the price are fixed beforehand, usually according to the towage company’s
tariff of rates. The towing vessel’s services are not voluntary, and no salvage
reward will be due unless some peril arises during the towage such as to
require extraordinary assistance from the tug. Salvage, on the other hand, is
governed by admiralty law. It is a voluntary action, and any reward is
dependent on some measure of success. The term “no cure, no pay” is
used in most salvage agreements. The reward can only be determined after
completion of the salvage services.

 

 

 

 

 

 

 

 

 

5.Bibliography

 

 

Case Leduc And Co V Wards (1888) Court of
Appeal.
D. Mississippi Valley Barge Line Co. v. Indian Towing Co. (1956) Appeals
Court.
Evanow v. M/V NEPTUNE (1998) United States Court
of Appeals.
Flottbek (1902) Court of Appeals.
Foster v Colby (1858) COURT OF EXCHEQUER.
Lickbarrow v Mason (1788) House of Lords.
Maritime Coverage Corp, 2016. TOW OR SALVAGE….THERE IS
A DIFFERENCE, Miami: Maritime Coverage Corp.
McConnochie v. Kerr (1881) Court of Admiralty.
sanders bros. v Maclean (1883) House of Lords.
SEMCO SALVAGE & MARINE PTE. LTD. (1997) HOUSE OF LORDS.

THE TROILUS (1951) HOUSE OF LORDS.
Trask v Maddox (1863) PRIVY COUNCIL.
Wegener v Smith (1854) Court of Sunderland.
White, S. F., 2000. Understanding the Difference Between
Towing and Salvage, London: Offshore Risk Management.